BoA may ask Goa to compensate SEZ developers

The Board of Approval for Special Economic Zones may ask the Goa government to pay compensation to the developers of the three notified zones in the state for scrapping these projects.

"The matter would be discussed at the Board of Approval in February. We will not take a hasty decision, considering that the SEZs are already notified and investments have been made. One option before the Goa government is to compensate the developers for the investments that they have made. It is up to the state government to negotiate with the developers and avoid litigation," said a commerce ministry official.

Commerce Minister Kamal Nath said the SEZ Act had been very successful and had generated employment and investment.

"There is no rethinking on the Act. The Goa Chief Minister has written to us and we are studying the matter. The government is not thrusting anything on states. It is for the states to take a decision on the kind of development model that they would like to have," said Nath on the sidelines of the CII Partnership Summit in Gurgaon.

In December 2007, the Goa government had decided to scrap the 12 SEZs in the state and recommend to the central government to de-notify the three notified ones.

Commerce Ministry officials had earlier said that de-notification of zones was not an option, as the SEZ Act of 2005 did not have any provisions on the matter.

Subsequently, the Goa government wrote to the commerce ministry, stating that the state did not need these SEZs. Moreover, the state government also said that there was not enough power available in Goa to provide the tax-free zones.

SEZ experts said the complex dispute can only be sorted out if the developer withdraws the application for the zone.